Yes, there was class action lawsuit. I think all of us Zip drive owners got a coupon for some token amount of money towards the purchase of additional products from Iomega.
Never understood the “click of death,” but it seems there were so many angry users that it must have been real for some. I never had a single problem with my SCSI Zip drive. I used it with two Macs and two PC laptops (with SCSI PCMCIA card) and I moved it around and bumped it a lot. It was in high, high use, since hard drives were small back then – I think 250MB on the first Mac and maybe up to 2GB on the most recent of those laptops. A 100MB “floppy” was a lot then. But when I got my first Yamaha SCSI CD-Burner (4x burning!) the Zip was sold on eBay, and I never heard complaints from the purchaser.